So… there’s something that comes from the world of direct response copywriting that would seriously help entrepreneurs doing their customer development and applying Lean Startup principles to their startup.
It’s a relatively simple heuristic (thinking tool) and it’s called: Market Sophistication. We’ll get into how to use it in a moment, but what you need to know is that it will help you with your entrepreneurial timing, achieving product market fit, and finding the right messaging for your marketing and growth.

Customer development helps you find the people that would likely buy your product. Then it helps you build your minimum viable product, based on what those people indicate they would pay for.

Okay, well. Great! So, after you’ve done your problem interviews, and your problem-solution-fit interviews, built your MVP and you’ve got your first 10-20 users or customers… Now you just need to keep building the product, add money and shake vigorously, right?

Not really.

You’ve got that little problem of scaling up sales. You’ve proven a few people will buy this thing, so now you need to find a large group of people who will buy it. This is where understanding Market Sophistication will help – when it’s time to hunt your customers.

Market Sophistication helps you understand where to position your product in the market (and by “market” I mean the collective mind of people that might buy your stuff) so people will want to buy it and so people will perceive your product as different from your competitors’.

Cool stuff, right? Now, are you ready to learn to apply this?

Let’s get to it.

Market Sophistication has 5 levels. To get people to buy or use your product, you need to get a gauge of what level of sophistication your market is at. You do this by looking at the messaging your competitors are using, like PPC ads, home pages, TV commercials, radio commercials, and landing pages. Also, (we’ll cover this in another post) you want to find out who your competitors are by asking your market (current & prospective customers).

Here’s how the 5 steps of Market Sophistication work.

Market Sophistication Level 1
At this level, you’re the first to bring a product to the market. And, if you’re the first person to enter a market, then you only have to tell people what your product can do. For example: The first guy to ever offer a product to help people lose weight only had to say, “Now lose ugly fat.” No one had seen a product that could help them lose weight before, so there was no history of bad products or shady advertising yet, and so it was inherently believable.

Most likely, if you’re a startup now and your market is at Sophistication Level 1, your users, buyers and prospects will tell you that they can’t think of any alternative they would use if your company was no longer around. That’s a pretty clear signal that you’re creating a new market… and thus… you’re in a blue ocean.

So to be clear, at Market Sophistication Level 1, people have never seen any advertisements for a product like yours. They have no sophistication when it comes to the type of product you offer. So, it’s enough for you to simply tell people what your product can do.

Just talk about the need you’re addressing or the claim you’re making in your headline. Amplify the claim you’re making in your copywriting, then bring up your product and prove that it works. That’s how to advertise in a market at Sophistication Level 1.

Market Sophistication Level 2
At this level of sophistication, people in the market have seen the claim you’re making repeatedly. There are many competitors making claims similar to yours and addressing the same need. At this stage, you have to exaggerate your claim. You need to make a bigger claim than your competitors do, then prove that you can deliver.

For example: “Lose 53 lbs in 1 month without ever feeling hungry or sacrificing any of the foods you love.” That sounds kind of ridiculous, doesn’t it? But see how this is the same claim as “Now lose ugly fat,” except now it’s exaggerated and quantified?

In recent years, we’ve seen the cell phone companies make Level 2 arguments about their data plans. Remember this Sprint commercial talking about “true unlimited data”…?

Sprint made the enlarged claim that their network was ‘truly unlimited’ while their competitors were in some way limited. In this commercial, Sprint is making a Market Sophistication Level 2 argument about how unlimited their data is, and making a claim larger than their competitors’.

Now we understand what happens at Sophistication Level 2. You need to exaggerate your claim, because you have many competitors making the same claim as you’re making. Your exaggerated claim helps consumers find the best solution, but you have to back up everything you claim your product can do.

Then the problem arises. Eventually, this process of enlarging and exaggerating claims/promises disintegrates, and the market becomes jaded. They stop believing advertisers yelling louder than one another that they are the biggest or the best. That’s when you get to Level 3…

Market Sophistication Level 3

This is the level of Market Sophistication where the market has been exposed to too many exaggerated claims, and they don’t believe what advertisers are saying anymore.

In this stage you need to talk about the feature or mechanism that makes your product unique/different from other products. It doesn’t really matter what the feature is, the point of this is to give the reader or viewer a reason to believe the claims you’re making —– in spite of the fact that everyone in the market is shouting the same thing just as loud – “absolutely lowest freakin prices!” “best performance,” etc…

This new feature, or belief mechanism, gives the prospective user/buyer justification to believe that your product can do the job you claim it can do.

That feels hard to grasp as I write it, so let’s use an example.

Let’s look at a real-world company using a Level 3 marketing tactic in the insurance industry: Esurance.

Esurance provides prospective buyers with a mechanism to believe their claims: Esurance operates online only. This premise gives their potential customers a reason to believe that they can operate with greater efficiency and thus pass the savings on to the consumer.

They even go so far as to call out other competitors yelling about pricing in this commercial. Take a look:

Now, instead of yelling “low cost” louder than a competitor, Esurance has emphasized the feature of ‘online-only operations.’ The fact that they operate online only is a mechanism that lets people give themselves permission to believe the claim that Esurance can provide lower cost insurance than their competitors. This mechanism is, in fact, the company’s value proposition. That’s what advertising looks like at Sophistication Level 3.

So, to be clear:
In Market Sophistication Level 3, the emphasis of your messaging switches away from what your product does, to how it does it – in a new way. Doing this gives people permission to believe that the product can actually do what it claims to do (even though they’ve been bombarded with exaggerated claims).

Interesting stuff, right? Yeah, I think so too.

But then, the problem arises — your competitors start creating mechanisms of their own, or they start copying the feature that gave your customers permission to believe the claims you made. How do we overcome this? Glad you asked…

Market Sophistication Level 4

Now competitors will copy the mechanism, or make their own version, and they’ll make it cheaper/faster/better.

Stage 4 amounts to the exaggeration of the mechanism (a lot like stage 2, exaggerated the claim). Companies start screaming louder than each other about WHY & HOW a product does what they say it’ll do.

Also, in this stage of sophistication, you’ll find that competitors will go line-by-line with an argument and destroy each potential advantage of a competing product.

And you get commercials like Apple made when they’re were sticking it to Microsoft with those “Mac vs. PC” commercials.

Let’s take a look at Apple’s “Mac vs. PC” commercials to see what Market Sophistication Level 4 looks like.

Notice that Apple piles on the arguments destroying each advantage of PC’s in a line-by-line fashion. Apple also piles on the features (and belief mechanisms) that allow people to believe that Mac’s are better. Apple goes line-by-line destroying every objection that a prospect might have in favor of buying a PC over a Mac.

These are the specific features (mechanisms) that Apple is piling on:

Apples don’t get viruses.

Apples don’t have spyware.

Apple’s power plug is magnetic and pops right off if it’s tripped over.

Apple makes creative work like movies, pictures, and design easy to do.

Apple is piling on these features to trigger the belief that Mac’s are better than PC’s. The features are mechanism on top of mechanism, line-by-line argument that Mac’s are superior to PC’s. That’s how Level 4 works.

And eventually, just like in every other level of Market Sophistication, your competitors will catch on, adapt, imitate, and become more efficient. So what do we do when this happens? We use a Level 5 strategy…

Market Sophistication Level 5

In the final stage of Market Sophistication, the market no longer believes any of the messages or mechanisms. The market is jaded; they don’t trust what advertisers are putting out there.

The messaging switches away from the promise/claim and the mechanism to ‘identification.’ This is where the personalities that you put together to represent your brand will help your prospects relate to and have rapport with your brand.

Your brand or product will help your user/buyer acquire the roles in society they want to have, or the social roles they want to have amongst their friends & peers.

Let’s think of some examples.

If you’re a Pabst Blue Ribbon Beer (PBR), you’d have a commercial full of hipsters riding unicycles and grooming their silly (but awesome) facial hair. At Market Sophistication Level 5, your brand helps people project the identity they wish to communicate to their social circle and their peers.

BMW is a status symbol. You don’t market this car based on features that make it better than competing cars; you market this car based on the social status it achieves for the owner. It’s marketed based on the high level of achievement that’s communicated through implication to everyone the car’s owner comes in contact with.

In Level 5, you identify the longings for social roles that people want to have, then you align your messaging and branding to reflect and communicate the attainment of that social role people long and desire for.

A good example of brand operating at Level 5 Market Sophistication is BetaBrand. With such awesomeness as the executive hoodie (check that out), BetaBrand is clearly targeting hipster homies and millennials that want to look awesome. They’ve got a relatively well-known brand (amongst my peers), but I still think their homepage could use some work.

BetaBrand helps people my age project the type of person they want to be interpreted as. BetaBrand helps their target demographic communicate the social circles they might belong to according to the clothes they wear. This is identification, and this is what Market Sophistication Level 5 is all about.

Market Sophistication Level 5 can get really fun. When Old Spice was making their “Old Spice Guy” commercials, they made everyone laugh, and they helped communicate the social role men could achieve by using Old Spice Body Wash – mainly that they would become a sexy man and a chick magnet.

You see the same thing from Axe commercials, that if you use Axe Body Spray, you become a chick magnet.

And who says men just want one thing? Hahahaa…

Then we have examples like the Dollar Shave Club, they sell razors via monthly subscription. Yes, they are a new service, but I place them at Level 5, because they use identification in their advertising. In addition to that, the only thing more commoditized than shaving razors that I can think of is salt. Take a look at how they make a meaningful argument for you to buy their product, while being freakin’ hilarious: www.dollarshaveclub.com

All the above are Level 5 marketing messages. They promote a product and help project an identity role that people want to be affiliated with or project.

Conclusion

So there you have it – 5 levels of market sophistication. If you look at your competitors messaging and figure out what level of market sophistication your market is in, you can create messaging that will break through the noise and actually reach your users & customers. This will also help you with your entrepreneurial timing, making it less likely you develop a product that’s designed for the wrong level of market sophistication. Do you have any examples of commercials that relate to the 5 levels? If you do, post them in the comments. If you found this useful, subscribe below and tell me what you found useful in the comments.

Is it right to say that market awareness increases proportionally with market sophistication? In other words the more a person is aware and get further in the buying cycle the more sophisticated become?

Hey Fred, great question! So, the answer is no, except in one instance. Awareness has to do with how aware of their problem and any existing solutions a prospect might be. Let’s turn directly to Eugene Schwartz and his definition of Awareness in the book Breakthrough Advertising:

1.The Most Aware: Your prospect knows your product, and only needs to know “the deal.”
2.Product-Aware: Your prospect knows what you sell, but isn’t sure it’s right for him.
3.Solution-Aware: Your prospect knows the result he wants, but not that your product provides it.
4.Problem-Aware: Your prospect senses he has a problem, but doesn’t know there’s a solution.
5.Completely Unaware: No knowledge of anything except, perhaps, his own identity or opinion.

In most stages of market sophistication, except for 1, the prospect has to be considering a purchase, and thus already aware of the problem or solutions.

The interesting thing happens in stage 1, where intrinsically the prospect is unaware, and then again in sophistication level 5, where the prospect stops believing exaggerated claims & mechanisms. They basically choose to ignore the market/product, and become unaware by choice.

AboutDaniel Gonzalez

Daniel Gonzalez has helped Silicon Valley startups increase conversions, & speed up user acquisition. He's a lean startup junkie and applies the methodology in his approach to conversion rate optimization. He loves the 'aha' moments when he gets insights that reveal the reasons-why people buy. He writes about himself in the 3rd person to sound more epic, and helps grow revenue from current web traffic sources.